Despite affordability concerns, first-time buyers are making lifestyle changes to save more of their income towards a deposit on their first home. After seeing an average 5.6% increase in property prices over 2022, in this article, we will look at Rightmove's 2023 outlook for UK property and the latest study revealing the most common ways that first-time buyers are cutting back to save more towards a deposit.
To save as much as possible towards a deposit, first-time buyers are cutting back on spending money on leisure activities. Reducing spending on going out is the most popular (72%), followed by using less gas and electricity at home (55%), spending less on holidays (49%), cutting the amount they spend on a food shop (48%) and cancelling subscription services such as Netflix and Amazon Prime (35%).
These small changes can add up to significant savings over time, and demonstrate the determination of first-time buyers to get on the property ladder.
Sources of Deposit
Further emphasising the importance of saving as much as possible, only 16% of aspiring first-time buyers said all or part of their deposit would be raised by getting a loan or a gift from friends and family.
The majority (86%) say they will use their savings to fund a deposit. It is taking an average of five years for a first-time buyer to save up their deposit.
This is significant as the average monthly mortgage payment for a new first-time buyer taking out a two-year fixed mortgage at 90% Loan-to-Value (LTV) is now £1,324, which is 41% higher than the average monthly rental payment of £940 following mortgage interest rate rises.
Popular Property Types
First-time buyers are looking for a three-bedroom semi-detached house outside London, while London first-time buyers are looking for a two-bedroom flat.
When it comes to features in the home, first-time buyers prioritize energy costs, a spare room, and space to work from home. Experienced buyers prioritize a garden, a parking space, and a garage more than first-time buyers.
First-Time Buyer Demand
Demand in the first-time buyer sector is down 26% compared to the frenetic market of last year.
However, this also means that despite the many economic challenges, first-time buyer demand is still three-quarters of last year’s level in what was an exceptional market.
Now that mortgage rates have settled down, first-time buyers will be hoping that the Autumn budget doesn’t include anything that would significantly impact their ability to save.
So to sum up
First-time buyers are making lifestyle changes to save money towards a deposit. They are cutting back on leisure activities, and only a small percentage are receiving help from friends or family.
The study shows that saving for a deposit takes an average of five years, which is significant as the monthly mortgage payments can be substantially higher than rental payments.
When it comes to property types and features, first-time buyers are prioritizing energy costs, a spare room, and space to work from home. Despite the economic challenges, first-time buyer demand is still high.